Ukraine to import more EU gas, citing Russia crisis

Ukraine is seeking to import more natural gas from Europe via Slovakia as Russia demands an extra $11.4 billion for contracted fuel and clashes with pro-Russian forces in the country’s east escalate.

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By ANNA SHIRYAEVSKAYA and ELENA MAZNEVA

Bloomberg

Ukraine is seeking to import more natural gas from Europe via
Slovakia as Russia demands an extra $11.4 billion for
contracted fuel and clashes with pro-Russian forces in the
countrys east escalate.

The European Union, Slovakia and Ukraine are meeting in
Bratislava, Slovakia, on Friday to discuss imports from the
west to reduce Kievs dependence on Russian gas.
European supplies could replace less than half of imports
from Moscow-based OAO Gazprom, according to data compiled by
Bloomberg.

It is not a long-term solution in terms of diversifying
away from Russian gas, Simon Pirani, a senior research
fellow at the Oxford Institute for Energy Studies, said
yesterday by phone. What we have to remember is that,
in any case, the vast majority of gas volumes in that part of
Europe are going to originate in Russia.

Ukraine and Slovakia have so far been unable to agree on
terms and volumes of flows from Europe. The EU and the US are
jointly seeking alternative supply sources to Ukraine,
including reversing pipelines amid the worst standoff between
Moscow and the West since the Cold War, spurred by the new
Kiev governments plans for closer ties with the EU.

Slovakia, a transit country for the fuel, pumped more than 50
billion cubic meters from Gazprom through its pipelines to European nations last year, or
about a third of the worlds biggest gas exporters
sales to the region, according to data from Eustream, the
Slovakian pipeline operator, and Gazproms export unit.
That compares with 5.4 billion cubic meters Slovakia imported
for its own needs, according to Gazprom.

Commercial Problem

We can say quite clearly that there is a commercial
problem, in the sense that Gazprom is obviously a very large
client for Eustream, and obviously it is not in
Gazproms commercial interests for reverse flows
deliveries to start, Pirani said.

Russia shipped 25.8 billion cubic meters of gas to Ukraine
last year, including supplies to state-owned NAK Naftogaz
Ukrainy, or about 71 million cubic meters/day, meeting half
of the nations demand, according to data from Gazprom.

Eustream last week offered to start reversing supplies to
Ukraine in October. The flows would be about 8.8 million
cubic meters of gas/day, or 3.2 billion cubic meters a year,
said Vahram Chuguryan, a company spokesman in Bratislava.
Thats enough to replace 12% of Ukraines imports
from Russia, according to data compiled by
Bloomberg.

The European Commission is confident that a
memorandum of understanding on reverse flows can be signed
between the two pipeline operators Eustream and UkrTransGaz
in Ukraine, the EUs regulatory arm said.

The new fuel bill from Moscow is for contracted gas that
Ukraine failed to buy last year, Sergei Kupriyanov, a
spokesman for the Russian state-controlled exporter, said
today by phone. Naftogaz was obliged to pay for 41.6 billion
cubic meters of gas in 2013 under a take-or-pay contract,
whether or not the volumes were imported, he said. The charge
follows a separate bill for $2.2 billion for unpaid past
supplies.

Russia is ready for talks with the EU and Ukraine on April
28, Olga Golant, a Russian Energy Ministry spokeswoman, said
today by phone. No date or venue for negotiations with Russia
has been set yet, Sabine Berger, a spokeswoman for the
EUs Oettinger, said today.

Gazprom doubts it is possible to ship gas from Europe to Ukraines central
or eastern regions, CEO Alexey Miller said on April 5,
according to Interfax. Kupriyanov declined to comment on
reverse flows.

Poland Flows

Ukraine can also import about 4 million cubic meters/day, or
1.5 billion cubic meters of gas/year, from Poland, according
to Naftogaz and Polish state-run pipeline operator
Gaz-System.

Supplies from Poland began this month under a deal with RWE,
Germanys second-biggest utility.

Hungary may supply fuel to Ukraine through a separate
pipeline with annual interruptible capacity of about 6.1
billion cubic meters, or 16.8 million cubic meters/day,
according to the national pipeline operator FGSZ.

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